The homeowner and the lender must agree to modify a mortgage note. The Real Estate Settlement Procedures Act, or RESPA, a federal law regulating mortgages, forbids mortgage lenders from modifying or changing a mortgage note in any way without the homeowner's consent. This prevents the lender from raising the interest on a fixed-rate loan.

History

When the real estate bubble popped and the nation descended into the recession of the late 2000s many homeowners found themselves unable to pay their mortgages. The Barack Obama administration created the Making Home Affordable program, which provided government incentives for mortgage lenders to modify mortgages.

Function

The Making Home Affordable modification plan was designed to help homeowners struggling to make their mortgage payments avoid foreclosure. The modification changes the terms of the loan permanently. The modification may change the interest rate, the loan amount or both.

Requirements

The homeowner must live in the home as a primary residence, must have obtained his current loan before Jan. 1, 2009, must have been at least 30 days late on a mortgage payment in the last year, and must owe no more than $729,750. In addition, the current mortgage payment must be more than 31 percent of the homeowner's gross monthly income.

Applying

Homeowners must contact a Housing and Urban Development-approved housing counselor and obtain free counseling. Homeowners can contact HUD at 888-995-4673 for a list of free housing counselors in their area. The homeowner must then complete the application for modification, 4506T-EZ, and provide the current mortgage lender with proof of household income.

Benefits

If the homeowner qualifies, the lender will temporarily modify the loan so the payment is no more than 31 percent of gross monthly income. A trial period will ensure this payment is affordable and the homeowner is willing to make the payments. The loan permanently modifies once the trial period is completed successfully.

About the Author

David Rouse, currently residing in Raleigh, N.C., has been writing and teaching home owners about the mortgage industry since 1997. Rouse has written training manuals for mortgage professionals and conducted informational first-time home-buyer seminars, providing make-sense answers for a long and confusing process. He studied at Western Kentucky University.

Photo Credits

house image by Byron Moore from <a href='http://www.fotolia.com'>Fotolia.com</a>